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Jumat, 06 Mei 2011

SMGR Stable 2011 With Bright Outlook Afterward - AAA

Semen Gresik group reported its 1Q11 performance with 9% increase in revenue YoY and stable net profit margin at 25%. While opportunities abound, limited production capacity will be the main reason behind SMGR’s limited revenue growth in 2011. As capacity being added, which will be finalized in 2012, we can only expect a stable 2011 for SMGR. From then on, SMGR can go at a full speed in taking advantage of Indonesia’s economic growth, especially in outer Java when mining and plantation sectors grow robustly and where infrastructure development is most needed. Our valuation using blended method, DCF, EV/Ton, and PER results in a target price of Rp11,300. BUY.

± Limited revenue growth with stable net profit margin
The increase in revenue to Rp3.5 trillion were due to 2% higher sales volume YoY to reach 4.3 million tonnes and an increase in average selling prices by 7% YoY to USD818.7/ton or Rp 40.935/sack. The breakdown of the sales volume increase is as follow: Tonasa plant +9% YoY to 0,8 million tonnes, Padang plant +5% YoY to 1,3 million tonnes while Tuban -2% YoY to 2.2 million tones, the latter was due to stiffer competition in Java and limited capacity. Although revenue increased, SMGR’s market share went down slightly by 1% to 40%, as its competitors benefit from constrained capacity experienced by SMGR.

± Manageable costs
SMGR managed its cost fairly efficiently, as can be seen from its relatively sustained 1Q11 Gross Profit Margin and Operating Profit Margin of 46% and 30% respectively. The increase in manufacturing costs was caused by higher energy and electricity costs. In order to manage the rising energy costs, SMGR is now mixing lower caloric coal in its power source. As such, net profit margin could be maintained at 25% YoY to reach Rp871 bn.

± Opportunities Abound
SMGR is now working to finalize adding capacities to its Tuban and Tonasa plants. Each plant will add about 2.5 million tons per annum. After finalization, the total installed capacity will increase to 25 million tons per annum from currently 20.5 million tons. The completion of Tuban IV and Tonasa plants in 2012 will certainly be the key factor that will push growth in the near future. Furthermore, optimistic view on Indonesian economic growth along with its bottleneck problems in infrastructure development provides a suitable climate for SMGR’s growth.

± Valuation
As volume is limited by production capacity that has reached 100%, the only thing that could contribute to higher sales in 2011 is an increase in selling price. However, considering additional new production capacity with the support of economic growth 2012 onwards, SMGR performance is expected to be good. By using a blended valuation method (DCF, EV/Ton, PER), we arrived at a target price of Rp11,300 and recommend BUY.

ADRO:No more translation effect - Mandiri

ADRO’s 1Q11 results within industry’s trend (about 20% of FY11F) in light of monsoon season. 1Q11 production accounted for 22.6% our FY11F target of 47Mt. It was a good start and on track with its FY11F target. Logistic improvement has led to despatch of US$103k in March 2011, showing us better improvement and good commitment from the company. E-4000 continued have encouraging demand, with sales of 1.2Mt accounting for 24% FY11F target of 5Mt. We know that ADRO is not cheap stock in industry in term of PER11F, but it looks attractive in term of EV/EBITDA at 6x. The near term catalyst might come from unlocking “Maruwai’s treasure” and closing the 3- 4 coal assets acquisitions to achieve its 80Mt target by 2014. ADRO will no longer face translation effect in its earnings report due to redenomination to USD. We maintain our TP at Rp2,800/share and Buy rating.

1Q11 within industry’s average. ADRO produced and sold about 10.6Mt (-6.7% yoy, +2.3% qoq) in light of monsoon season. ADRO posted 1Q11 net profit of US$109mn (+12.1%yoy,+91.2%qoq) accounted for 19.0% our FY11F. 1Q11’s ASP of US$63.8/ton in line with our estimate, accounting for 91.2% of our FY11F of US$70/ton. In quarterly basis, ADRO posted better margins which operating margin and EBITDA margin have recovered to 29% and 35% from the previous quarter of 21% and 25% respectively.

Higher reserves and resources. ADRO reported higher reserves and resources of 938Mt (+5.5%) and 4,429Mt (+28.6%) based on independent party by Terence Willsteed & Associates in accordance to JORC code. Interestingly, ADRO still used long term coal price FOB Kelanis of US$55/ton or benchmark price of US$75/ton, which means there is still much upside potential for its reserves and resources.

New accounting standard & redenomination. ADRO has redenominated its reporting from IDR to USD currency to minimize forex translation fluctuation and adopted new accounting standard, revised PSAK 22, which goodwill amortization no longer applied. Instead, impairment-like principle based on recoverable amount (revised PSAK 48) will be applied from 2011 onwards. This is positive to its bottom line, reflecting the real cash earnings.

Maintain Buy and TP.. We made minor changes with the associated higher fuel cost resulting 5-6% increase in cash cost, but we maintain our TP at Rp2,800 implying 17.5xPER11F and 13.1xPER12F. Historically ADRO’s stock was firmly traded at premium range of 16x-20x PER. Currently ADRO is traded at 14.8xPER11F. Reiterate Buy.

Minyak kembali naik lewati US$100 per barel - Bisnis Indonesia

JAKARTA: Minyak kembali naik dari level terendahnya 2 pekan di bursa New York karena penurunan harga hingga ke level di bawah US$100 per barel dinilai terlalu jauh dan terlalu cepat.

Harga kontrak berjangka naik tipis 0,7%, setelah meluncur 8,6% kemarin yang merupakan laju penurunan terbesar dalam lebih dari 2 tahun. Indeks kekuatan relatif minyak turun ke level 32 yang merupakan terendah sejak 24 Agustus.

Indeks kekuatan relatif menjadi patokan seberapa cepat laju fluktuasi harga. Level 30 biasanya mengindikasikan kemungkinan komoditas itu mengalami rebound harga.

Minyak mentah untuk pengiriman Juni naik tipis US$0,70 sen menjadi US$100,5 pada perdagangan elektronik di bursa New York Mercantile Exchange. Harga kontrak tersebut berada pada level US$100,13 pada pukul 10:53 waktu Sydney. Kemarin, harga turun US$9,44 menjadi US$99,80 yang merupakan posisi penyelesaian terendah sejak 16 Maret dan persentase penurunan terbesar sejak 20 April 2009.

Sepanjang pekan ini, minyak turun 12% dan merupakan penurunan pekanan terbesar sejak 7 Mei 2010. Meski begitu, harga minyak tetap lebih tinggi 30% dibandingkan tahun lalu.

Kemarin harga minyak jatuh setelah kenaikan klaim pengangguran AS yang mengejutkan dan penguatan dolar AS.

Adapun harga minyak mentah brent untuk pengiriman Juni naik tipis 0,5% menjadi US$111,34 per barel pada bursa ICE Futures Europe yang berbasis di London.

Gajah Tunggal 1Q operating profit drops - Insider Stories

Indonesia's largest diversified tire maker PT Gajah Tunggal Tbk (GJTL) reported a 10.84% drop in operating profit for the first quarter of this year on the back of cost of goods sales (COGS) increase.
The company posted Rp281.32 billion in 1Q 2011 from Rp315.53 billion, sending its operating margin to 9.72%, lowered from 13.63%. COGS increased 33.51% to Rp2.47 trillion from Rp1.85 trillion.

Gajah Tunggal's sales rose 25.11% to Rp2.89 trillion from Rp2.31 trillion. The company recorded Rp349.47 billion sales to tire maker Michelin North America, which was more than 10% of Gajah Tunggal's condolidated sales.
However, the company was still in a positive growth of net profit, mostly driven by higher foreign exchange gain.

Gajah Tunggal's net profit increased 21.79% to Rp338.18 billion or IDR95 per share from Rp277.66 billion or Rp71 per share.
Gajah Tunggal is 49.35% controlled by Denham Pte Ltd, Compagnie Financiere Michelin of 10% stake, Cooperatives of 0.12%, directors of 0.08%, and public shareholders of 40.45%.

Salim Ivomas tawarkan 3,16 miliar saham - Bisnis Indonesia

PT Salim Ivomas Pratama menawarkan 3,16 miliar lembar atau setara 20% saham melalui penawaran umum saham perdana pada 9 Juni 2011.

Dalam prospektus ringkas yang dipublikasikan perseroan hari ini, anak usaha PT Indofood Sukses Makmur Tbk tersebut berencana menggunakan dana hasil penawaran umum perdana untuk membayar utang bank sebesar 40%, sementara sebesar 50% dialokasikan membiayai divisi perkebunan untuk program penanaman baru dan pemeliharaan tanaman, pembangunan fasilitas pengolehaan termasuk sarana dan prasarana.

Setengah dana hasil penawaran umum perdana tersebut akan digunakan bertahap dan diproyeksikan akan habis dalam waktu lima tahun. Adapun, 10% sisanya akan digunakan untuk membiayai divisi minyak dan lemak nabati terutama penambahan fasilitas produksi dan pembelian sarana transportasi kapal.

"Saham yang akan diterbitkan tersebut adalah saham baru yang berasal dari portapel perseroan dengan nilai nominal Rp200 per saham," tulis prospektus, hari ini.

Perseroan telah menunjuk PT Kim Eng Securities, PT Deutsche Securities Indonesia dan PT Mandiri Sekuritas dipercaya sebagai penjamin pelaksana emisi efek dalam IPO tersebut.

Perseroan memperkirakan tanggal efektif pada 27 Mei, kemudian dilanjutkan masa penawaran pada 30 Mei-1 Juni 2011. Sebelum listing, perseroan akan melakukan masa penjatahan pada 6 Juni 2011.

UNTR Prediksi Penjualan 4.200 Unit Alat Berat -

PT United Tractors Tbk (UNTR) memperkirakan penjualan alat berat menjadi 4.200 unit hingga Juni 2011.

Hal itu disampaikan Direktur Keuangan PT United Tractors Tbk Gidion Hasan, saat ditemui pada RUPST ASII, Jumat (6/5). "Hingga April kita sudah menjual 3.000 unit. Diharapkan minimal menjadi 4.200 unit pada Juni," tutur Gidion.

Gidion menambahkan, Jepang mulai mempertimbangkan tsunami membuat Komatsu Jepang menambah produksi Komatsu di Indonesia. Penambahan produksi di Komatsu Indonesia telah dilakukan sejak April lalu.

PT United Tractors Tbk menargetkan penjualan alat berat sebesar 7.000 unit pada 2011. Sebelumnya perseroan telah menjual alat berat sebesar 5.400 unit pada 2010.

Sementara itu, Direktur PT Astra International Indonesia Tbk Johnny Darmawan mengatakan, Jepang juga mempertimbangkan akan merelokasi pabrik ke negara lain khususnya Indonesia. Hal ini dilakukan untuk efisiensi. Tapi hal ini masih menunggu infrastruktur dan peraturan.

Astra Int. to pay Rp1,600/share dividend - Insider Stories

Indonesia's largest auto maker and assembler PT Astra International Tbk (ASII) has been approved by annual meeting of shareholders to distribute a final dividend of IDR1,600 per share or IDR6.47 trillion, reflecting a 45% payout ratio of its net profit last year.

An investor who attend the meeting said the final dividend includes an interim dividend of IDR470 per share which was distributed by the company on November 15 2010. "Astra is scheduled to distribute the dividend on June 16 2011," he said today.

Astra reported a 43.13% increase in net income last year as revenue reached higher level. The company's net income reached IDR14.37 trillion last year from IDR10.04 trillion a year earlier. Operating profit rose 15.43% to IDR14.73 trillion from IDR12.76 trillion.

However, Astra's operating margin lowered to 11.33% from 12.95% because of higher cost. Gross profit increased 18.32% to IDR26.87 trillion from IDR22.77 trillion. Cost of goods revenue surged 36.11% to IDR103.12 trillion from IDR75.76 trillion.
Astra posted a 31.93% increase in revenue to IDR129.99 trillion from IDR98.53 trillion.

Produksi Mobil Astra Turun 15% - Detikfinance

Jakarta - Produksi mobil PT Astra International Tbk (Astra) pada periode April-Juni 2011 akan mengalami penurunan hingga 15%. Musibah gempa dan tsunami di Jepang mempengaruhi impor suku cadang mobil keluaran Astra.

"Produksi kami turun 15% dalam dari April hingga Juni untuk produksi roda empat. Karena suku cadang masih ada yang impor dari Jepang. Kebetulan divisi lain sangat menyokong banyak seperti agribisnis dan alat berat beserta roda dua," ujar Direktur Utama PT Astra International Indonesia Tbk Prijono Sugiarto, seusai RUPST PT Astra International Indonesia Tbk di Hotel Four Seasons, Jakarta, Jumat (6/5/2011).

Direktur PT Astra International Indonesia Tbk Johannes Loman menambahkan, meski ada penurunan produksi roda empat sebesar 15% hingga Juni 2011 diharapkan pendapatan masih akan tetap baik. "Pendapatan bersih mudah-mudahan masih akan bagus pertumbuhannya," kata Loman yang baru diangkat menjadi direktur Astra ini.

Penjualan mobil nasional sepanjang kuartal I-2011 mencapai 225.000 unit naik 30% pada periode yang sama tahun 2010 lalu. Porsi penjualan mobil Grup Astra (Toyota, Daihatsu, Peugeot dan UD Trucks) meningkat 27% menjadi 125.000 unit. Sementara itu penjualan motor di kuartal I-2011 naik 20% menjadi sekitar 2 juta unit.

Direktur ASII Johnny Darmawan mengatakan kenaikan minyak dunia yang berimbas pada kenaikan Pertamax belum akan mempengaruhi harga jual. "Astra belum terpikir untuk menaikkan harga jual. Hal ini masih dikaji lebih jauh," jelasnya.

Prijono menambahkan untuk produksi roda dua tidak terlalu berdampak pada musibah di Jepang. Diharapkan roda dua dapat memberikan kontribusi besar ke perseroan. Sementara itu, Loman menuturkan, perseroan menargetkan kapasitas produksi roda dua Astra naik pada tahun ini yang sebelumnya 3,5 juta unit.

"Pada kuartal kita akan menambah 500.000 unit sehingga kapasitas menjadi 4 juta unit," jelasnya.

Emtek approved to acquire Indosiar - Insider Stories

Extraordinary meeting of shareholders of PT Elang Mahkota Teknologi Tbk (Emtek), the parent company of television channel SCTV, unanimously approved the acquisition and tender offer of PT Indosiar Karya Media Tbk, currently controlled by Salim family.
“The meeting approved the acquisition of 27.24% of placed and paid in capital from PT Prima Visualindo in Indosiar at Rp900 per share, with total Rp496.53 billion,” President Director Elang Mahkota Susanto Suwarto said in a press release yesterday.

In the meeting, the shareholders approved that the company make tender offer after the acquisition of shares from PT Prima Visualindo. The offer will include the remaining 72.76% shares of Indosiar with price between Rp900 and Rp1,040 per share.
The meeting also approved the guarantee of 1.65 billion shares in PT Surya Citra Media Tbk in bank to get Rp1.5 trillion in loan. The approval is also given to make rights issue of 10% shares of Elang Mahkota, or 512.73 million shares at Rp1,300 per share.

Asia Equity Focus Net foreign institutional investor flows drive Indian equities - Credit Suisse

Sensex is likely to be range-bound in the near term
The Sensex has declined by 10% year-to-date (YTD) in 2011. Net foreign institutional investor (FII) flows were a negative USD 657 million in Q1 2011. However, the sell-off in emerging markets witnessed a reversal around the end of March, leading to strong inflows into most of Asia, including India. With USD 1.5 billion of inflows each in March and April, the YTD figure on FII flows into India has turned positive at USD 480 million. As a result, the Sensex has rallied by more than 10% from its February low of 17,296. However, after the surprise 50 basis point rate hike by the Reserve Bank of India (RBI) and its hawkish comments on inflation, markets have given away most of their gains and are currently down 10% on a YTD basis.

Our structural view on Indian equities remains positive, with earnings growth together with the peak in inflation by the middle of year driving our 1-year Sensex target of 22,000. Our cautious near-term view drives our shorter-term trading band expectation of 17,500–20,000, given the macro headwinds facing India. We would therefore advise investors to add to their equity exposure closer to the lower end of our trading band, as valuations become appealing at those levels. Also given our expectations of high volatility in the market, an absolute return-oriented approach and active profit-taking on part of the portfolio would help to generate better returns compared to a passive buy-and-hold approach.

Our two key themes in the last six months have been companies with good earnings visibility and companies geared to benefit from the global recovery. While we would continue to focus on the former, some of the global recovery plays have seen a strong outperformance over the last few months. On the other hand, interest ratesensitive sectors have seen a healthy correction in an environment of policy tightening. As the Reserve Bank of India moves towards completing its tightening cycle later in the year, investors should watch out for domestic-oriented interest rate-sensitive companies or banks, whose valuations look attractive. Our favorite stocks are ICICI Bank (ICICIBC IN / IBN US, BUY), ITC (ITC IN / ITCG LX, BUY) and Reliance Industries (RIL IN / RIGD LI, BUY).

Bukit Asam (PTBA IJ), production challenges, downgrade to SELL - CLSA

Nick Cashmore downgrades Bukit Asam (PTBA IJ) to SELL (from previously BUY) with Rp20k TP. This is a non consensus call. Of the 26 analysts covering PTBA, there are only two SELL recommendations. Our number is also 13% below consensus.

Surely, PTBA has massive long term potential (7.3bn tones of resources and 2bn tones of reserves) but execution has continued to be disappointing.

After a recent co visit, we think guidance of 13.6mt for 2011 looks ambitious now that additional rail wagons have been delayed until 3Q11, a six-month delay from original intentions. We have reduced our volume to 13.1mt this year and 15.5mt in 2012.

Lifting existing capacity above 16mt requires double tracking parts of the existing railway network, a project undertaken by KAI, the state-owned railway operator. Given the delay in infrastructure projects, we have concerns on the ability of KAI to deliver additional rail capacity on time and budget.

BBRI AGRO tender offer priced at Rp182 per share - DBS Vickers

Bank Rakyat Indonesia: Buy; Rp6,300; TP Rp7,700; BBRI IJ

BBRI has finally announced the tender offer price for AGRO at Rp182 per share. This tender offer is for 341.99mn AGRO shares. This tender is also applied for all unexercised warrants. The pricing is based on the average highest price in the 90 day period prior to this announcement. For this tender offer, BBRI has prepared Rp62.24bn that comes from the bank’s internal funding. As of March 2011, BBRI holds 87.79% stake of AGRO while Danpenbun holds 7.25% of stake. At the moment, BBRI is still forming a business expansion plan for AGRO.

BNI to inject Rp500bn into its subsidiaries - DBS Vickers

Bank Negara Indonesia: Buy; Rp3,875; TP Rp4,300; BBNI IJ

BBNI plans to inject Rp500bn of additional capital into its 4 subsidiaries - BNI Securities, BNI Life Insurance, BNI Syariah, and BNI Multifinance. BNI Securities and BNI Life Insurance will take priority against the other two. The Rp500bn comes from 5% of the earlier rights issue proceeds as initially disclosed. There is no clear detail on when and how the funds will be disbursed.

Aside from adding more capital, BBNI is also open to the possibility of forming strategic partnership for its subsidiaries’ expansions. The bank would need to remain as majority shareholder. For instance, a 25% stake in BNI Securities has been recently divested to SBI Securities from Japan with BBNI holding the rest.

On another note, BBNI also launched single access number call centre, “BNI Call 500046”. The bank has invested a total of US$3m for this investment from internal funds. This call center is a one stop solution for customers and operates 24/7.

TOWR signs Rp2.1tr debt facility - DBS Vickers

Tower Bersama Nusantara: Buy; Rp10,700; TP Rp15,000; TOWR IJ

Protelindo, a subsidiary of independent tower operator, PT Sarana Menara Nusantara (TOWR) Tbk, secured US$250 million (Rp2.1tr) loan from several banks. The facility agreement was signed on Tuesday (May 3) between Protelindo and DBS Bank Ltd, Oversea-Chinese Banking Corporation Limited, Standard Chartered Bank and The Royal Bank of Scotland NV, Hong Kong branch. Protelindo also signed the facility with other financial institutions called original lenders, and The Royal Bank of Scotland Plc as facility agent, plus Bank Central Asia as common security agent.

Access to funding is a key advantage in the business. Tower needs capital for acquiring and building towers, and access to adequate funding is a key advantage. TOWR had net debt of Rp4.5tr at the end of 2010, translating to FY10 net debt to EBITDA of 4.0x. TOWR is the cheapest independent tower operator in Indonesia . TOWR trades at 11.5x FY11F EV/EBITDA while offering over 20% FY10-12F EBITDA CAGR. This is at 30% discount to US peers who offer only 10% EBITDA CAGR. We see over 35% upside potential to our TP of Rp 15,000.

Cement sector should benefit from lower energy costs - UOBKH

Holcim's strategy to maintain low price will not last
Hold Holcim Indonesia, SMCB IJ, TP: Rp2,300 Share Price:Rp2,200 Upside:4.5% (Analyst: Marwan Halim,
1Q11 bottom line grew 2% YoY,
Net margin declined to 12% because of lower ASP, while the other 2 players maintained their margins at 30% and 25% and increased prices by 8%.
Managed to grab 2% of Semen Gresik's market share, but how long can they keep doing this? I think this strategy will further hurt margins and will eventually dampen overall earnings.
New cement plant in Tuban with 1.7mt p.a capacity will complete in 2013. This plant will not be an advantage, but it is a necessity for it to be able to compete with the other 2 players.

I prefer Indocement for exposure into the cement sector. Share prices climbed 2.71% yesterday, look into buying on pullback

First positive QoQ growth after 2 years, INTP 2011 Earnings may exceed estimate
Buy Indocement, INTP IJ, TP: Rp22,300, Share Price: Rp17,050, Upside:+30.7% (Analyst: Marwan Halim,
1Q11 net profit increased 10% YoY and 3% QoQ to Rp868bn, driven by higher sales volume and higher ASP.
To offset higher COGS from steep energy cost, INTP were able to increase ASP by 8% to 920,000/tonne without losing market share.
Margin improvement going forward,as we expect commodities price to soften, and more opportunity to increase prices later this year.
Zero debt position! Cash increased by 90% to Rp5tn, very flexible for further business expansion.
Running at 75% capacity, INTP is best positioned to absorb increasing demand, especially in greater Jakarta area.

MFIN Harvest Time - Indopremier

MFIN reported higher than expected performance in 1Q11. The net profit skyrocket to Rp 50.9 bn, leaped to double than 1Q10 and outperform our FY11 target. 2011 is the harvest time after robust new booking of Rp 3.7 bn in 2010. MFIN also benefit from PSAK implementation that lower provisioning in 2011 forward, potentially boosting net income. We upgrade our TP to Rp 890 per share from Rp 810 per share previously. 19% potential upside from current price.

Robust Interest Income Ahead
MFIN is starting to realize interest income from Rp 3.7 bn new financing booked in 2010 and 1Q11 revenue soared 60.4% YoY and 12.1% QoQ, reaching Rp 276.3 bn, or represented 25.6% of our FY11 target. We believe the robust growth will continue and we estimate Rp 1,079 bn revenue in 2011. Additionally, MFIN also booked Rp 898 bn new financing, or 32.6% YoY increase from Rp 677 bn in 1Q10. We maintain our FY11 new financing booked forecast of Rp 4.8 tn as we anticipate new financing will touch its peak during June-August (prior to Moslem festive month).

Higher Than Expected Bottom Line
The 1Q11 net income has doubled to Rp 50.9 bn, already represent 33.5% of our original forecast for 2011. The achievement was driven by lower provisioning expense on the implementation of PSAK 50/55, aside improving risk management. Since 2008 until 2010, MFIN has set a decreasing provision cost from 2% to 1.3% of total outstanding account receivable given the realization is always below the target. For 2010, the actual provision cost was only 1.05% vs target of 1.3%. Indeed, the implementation of PSAK 50/55 is expected to provide lower provision cost for multi-finance companies, including MFIN. The 1Q11 financing provision continues to decrease to approximately 1%, and should be lower if the economic condition remains conducive, and vice versa. We forecast MFIN to deliver Rp 195.5 bn net income in 2011, or grow 47.3% YoY.

Buy Recommendation
We upgrade our TP to Rp 890 per shares (from Rp 810 previously) on the back strong growth and low provision cost that will benefit the FY11 net income and forward. Our target price reflect 6.0x PER and 1.6x PBV in 2011.

Economic Flash - Indonesia's 1Q GDP growth - Bahana

Still strong at 6.5% y-y, but lower than consensus
§ Led by private consumption (+4.5% y-y) and healthy investment level (+7.3% y-y), Indonesia’s 1Q11 GDP growth reached 6.5% y-y (exhibit 5), higher than our estimate of 6.4% y-y, but slightly lower than market consensus of 6.58% y-y (exhibit 2).
§ However, we believe that underlying growth remains strong, particularly given that this was the best 1Q y-y GDP growth since 1998. Compared to 4Q10 GDP growth of 6.9% y-y, 1Q11 GDP performance slowed on the back of deceleration in government spending and net trade, as the stronger IDR stimulated higher imports, which grew 15.6% y-y in 1Q11, outpacing exports growth of just 12.3% y-y (exhibit 5).
§ On the industry side, strong support from agriculture and financial services helped GDP to grow at 1.5% q-q. Better harvesting in March and aggressive rice imports during 1Q11 were the main factors behind the 20.6% q-q growth in the agriculture sector (exhibit 6), whereas higher Business Tendency Index (BTI) in 1Q11 for the financial sector compared to 4Q10 also provided solid 1Q11 performance (exhibit 3).
Outlook and market impact
§ Going forward, with domestic consumption (56% of 1Q11 GDP) continuing to be strong, we believe Indonesia’s growth will remain well supported. We expect domestic consumption to be in line with the estimated Consumer Tendency Index (CTI) which suggests greater spending by Indonesian consumers in 2Q11 (exhibit 4).
§ In line with consensus and the Finance Ministry’s current estimate, we expect 2011 GDP growth of 6.4%, up from 6.1% in 2010.
§ With government spending on the decline (exhibit 5), insufficient capacity could be a problem, requiring the government to deal with the overheating of the economy, particularly given that core inflation has continued to rise.
Nevertheless, drop in oil prices to below USD100/bbl will help the government contain May’s inflation, before reaccelerating in June, just ahead of July’s back-to-school and fasting period. Thus, we still expect BI to hike its benchmark rate by 25bp in June to 7.00%. Once this final tightening is out of the way, we expect markets to perform better.

ELTY : Weak 1Q11 results - net profit fell by half yoy - Deutsche Bank

Net profit fell by half yoy
1Q11 Net profit fell by 78% qoq (-45% yoy) to Rp15bn. Bakrieland reported 1Q11 revenue of Rp425bn, down 9% qoq (but doubled yoy), achieving 31% of our FY11F. Gross margin also declined slightly by 2% qoq to 46%. EBIT declined by 13% qoq (+148% yoy) to Rp83bn, achieved 32% of our estimate. Please refer to table for summary.

Toll road: still losing money
In 1Q11, toll road contributed 7% to revenue but booked an operating loss of Rp8bn (vs. Rp5bn of operating profit in 1Q10). However, Kanci-Pejagan toll has seen pick in its average daily traffic to about 15,000, but still below company's target of 18,000. We expect this to gradually pick-up as the toll road is only in its second year of operation.

We maintain our Hold rating on the stock given the lack of contingency plan on its developments. Condo pre-sales for Epicentrum has remained weak, both The Wave and Grove, only sold less than 50% since launching in 2007. Pre sales overall continued to underperform versus its peers. In 2H11, ELTY expects to launch 5ha in Jonggol with average land selling price of Rp2mn per sqm. We believe demand would be lukewarm given the lack of infrastructure and proximity to Jakarta.

Commodities Sink Most Since 2009 as Stocks Fall - Bloomberg

Commodities plunged the most since 2009, led by oil and silver, and stocks posted the biggest three-day drop since March as selling of energy futures drove down equities. The dollar strengthened and Treasuries jumped.

The Standard & Poor’s GSCI index of 24 commodities sank 6.5 percent at 4:32 p.m. in New York and has lost 9.9 percent this week. Oil tumbled 8.6 percent, the most in two years, to $99.80 a barrel. Silver dropped 8 percent, extending the biggest four- day slump since 1983 to 25 percent. The MSCI All-Country World Index of shares in 45 nations fell 1.1 percent. The dollar rose 2 percent versus the euro, making commodities quoted in the greenback more expensive for holders of other currencies.

“It’s panic,” said Michael Shaoul, chairman of Marketfield Asset Management, which oversees $1 billion in New York. “You have those super crowded trades. Now you’re in liquidation mode. There’s nothing to do with weak U.S. economic data. It’s not a global financial crisis. It’s a classic liquidation move in a crowded trade.”

Selling swept commodities markets as investors sold positions following gains of more than 23 percent in 2011 through April 29 by silver, oil, gasoline, coffee and cotton. The dollar, which slumped 13 percent versus the euro between Jan. 7 and May 2 as the S&P 500 Index rallied 7.2 percent, strengthened against all 16 major counterparts except the yen after European Central Bank President Jean-Claude Trichet signaled he will wait until after June to raise interest rates. More ...

Today in Commodities: Panic Deleveraging - Seeking Alpha

The panic deleveraging should subside in the next few sessions and prices will likely turn north again. These moves are violent and not for the faint of heart but remain disciplined as I’ve seen some of the largest moves in my career in recent sessions…which equates to big money making/losing opportunities. A $10 decline in Crude oil drags prices under the 100 day MA for the first time since late November. Because the magnitude of the move we would book profits on shorts. To take it a step further to play a bounce some aggressive traders have bought June calls with two weeks time expecting a bounce of $3-5 in the coming sessions. RBOB and heating oil were hit hard as well which we predicted in recent posts… we just did not see it happening in one session. Our short target was reached in natural gas today…see previous posts. Scale out and book partial profits. The indices will close lower but held on better than other markets…all things considered I was impressed. If the trend line from mid-March holds on tomorrow’s jobs number we could bounce from here and retest the highs.

A dollar rally lifts the greenback 1.50% touching the 20 day MA for the first time in two weeks. We continue to like fading rallies in the Euro, Pound and Aussie. Their decrease in today’s session was 2.14%, .83% and 1.72% respectively. Gold is down nearly $100 in the last four sessions touching the 40 day MA which will serve as support; in June at $1462. We think there could be another $30-50 but then we would be an active buyer with clients. A $5 move in silver puts silver 30% lower in just under a week. This is why investors use risk capital and need to understand leverage. A 61.8% Fibonacci retracement has taken place and aggressive clients have started to work back into longs. Our suggestion is scaling into futures or selling puts under the market. The additional 2% decline in coffee today allowed clients to book a 68% net profit on their options trades from last week. We could see more downside in coffee and most of the soft commodities in the short run but in this market we‘re all about booking profits when we have them. Agriculture prices were hit today but we suggest using the current set back to be a buyer of new crop corn and soybeans. Clients are holding losing shorts in 10-yr notes and Euro-dollars into tomorrow’s jobs number willing to take a little more heat…stay tuned.

Risk disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

Kamis, 05 Mei 2011

ADRO (TP Rp2,475) : Decent 1Q results; recommend buying on any weakness - BoA Merrill Lynch

Not a bad 1Q to start off 2011, in our view
ADRO’s 1Q NP came in at US$108mn, up 12% YoY and 80% QoQ, reaching 22% of our FY est. Revenue was US$757mn, up 12% YoY and 3% QoQ, 22% of our FY est. EBIT was flat YoY and up 44% QoQ, at US$219mn, 20% of our FY est. We think 1Q numbers were quite decent. Starting 2011, ADRO has changed its financial reporting to US$ from IDR. Asides from changing our financials to USD from IDR, we largely maintain our ests and PO unchanged at Rp2,475.

Volume, ASP, cost within expectation
1Q volume was 10.9mn t, down 5% YoY and QoQ, reaching 24% of our FY est. The decline was not a concern, in our view, considering it was attributed to restripping work in 2009 and higher sales volume from Coaltrade in 4Q10 – ADRO
still expects to meet its 46-48mn t full-year sales target. ASP came in at US$63.8/t, up 16% YoY, and 8% QoQ. With recent coal price settlements done as high as US$87/t, we believe our full-year estimate of US$69/t is achievable. Cost came in at US$41/t, up 21% YoY, flat QoQ, on higher S/R albeit lower freight./demurrage cost, but this was all factored into our FY estimate of US$42.7.

Balance sheet not an issue
Current net debt to EBITDA stands at 1.0, vs the maximum of 3.5 set by the existing debt covenant. Meanwhile, debt service coverage, we calculate, was 3.2, vs the minimum of 1.2 at debt covenant. Assuming ADRO requires further cash for expansion, we estimate it can raise another US$2.5bn in loan (it should have US$420mn of standby facility by end-2011).

Maintain Buy rating; our fourth pick in the sector
While we expect near-term downside risk to the coal price, we are bullish on coal
price for the medium to long term. If there is any share-price correction, we would expect the stock to recover slower than its peers, as it is more liquid, with more volume growth already priced in. However, being the largest and most liquid coal
company, Adaro should be the preferred Indonesian coal play for some investors.
We reiterate our Buy rating and recommend buying on any weakness.

PT Bank Mandiri (Persero) Tbk Benefitting from Recovery - AAA

Bank Mandiri posted 1Q11 net profit of Rp3.8 trillion, indicating that for FY2011 the bank could easily deliver over ten trillion bottom line profit to investors, while ROE is at a premium level of 25%. Main catalyst remains the recovery of W/O loans. Apart from it, favorable economic environment will provide a strong back up for further loan growth. BUY.

± The Sell-off Shares of GIAA Boosts Net Profit by More Than 80% yoy
Mandiri reported 1Q11 net profit of Rp3.8 trillion, a surge by more than 80% yoy, and the highest since 4Q07. The number accounted for 30% of our estimate and 31% of consensus. Source of such gigantic net income growth is the sale of Garuda Indonesia’s shares (GIAA) amounted to Rp1.4 trillion. BMRI owned those shares from previous GIAA’s debt to equity swap. This has increased fee based income by 144% yoy to Rp3.6 trillion. NIM (excluding fee income), decreased to 4.9% as yield on assets plunged to 8.7% from 8.9%. We project NIM to average at 5.9% as portion of loan to total earnings asset will go higher in order to comply with BI’s LDR level.

± Strong Growth in Every Segment
LDR in 1Q11 stood at 70.2%, increased from 64.1% in 1Q10. Loan grew 26% yoy, 3% ytd and accounted for 60% of total earnings assets as opposed to only 55% in 1Q10. In every segment, loan growth was strong (see table below). The corporate loan portion decreased to 42% from 46% in 1Q11, which is good, as the bank could preserve its CAR, because corporate loan carries the highest risk weighting. Deposits grew 14% yoy, with saving deposits as the largest contributor, lifting up CASA ratio to 58% from 56% previously.

± Reiterate BUY - TP Rp8,500
We maintain our bullish stance on BMRI because: 1) the big potential of receiving recovery from written-off loans, estimated at around Rp6.2 trillion in total. 2) favorable economic environment to back up loan growth, 3) ROE and dividend yield, are still at premium level. We maintain our TP at Rp8,500, reflecting 3.5x PBV vs. current market valuation at 3.0x PBV. Historically, BMRI was traded at its 3.8x PBV at +2 std.

SMGR:The merit of cheaper coal - Mandiri

Along with below-consensus 1Q11 results, we noticed that SMGR’s domestic ASP has been increased by 7.8% yoy as of March 31, the highest among peers. We guess that this was a result of slow sales during 3M11 due to bad weather then, coupled with hurdles in fully utilizing its production capacity following the recent coal conversion. The conversion, on the other hand, seems to have an immediate effect on the company’s operation, with COGS/ton increasing by only 4.7% QoQ. This is good, especially as commodity prices are expected to continue rising later this year. We think catching up on sales will be much easier to do than to further mitigate rising production costs, currently faced by its peers. We maintain our EPS11F of Rp670 for SMGR. Nonetheless, our valuation is unchanged at Rp9,100/share, thus we maintain the Neutral stance on the stock.

Below- consensus 1Q11 results following bad weather and operational transition. SMGR posted Rp871bn 1Q11 net profit, which was below our and consensus estimates. Tepid sales growth of only 1.4% yoy during the 1Q11 was seen as the main cause to this, following bad weather and operational transition marked by the recent coal conversion for its production. The bad weather even caused floods in Feb-Mar in its Gresik plant, hampering cement transportation.

Sales to catch-up as weather improved. The company said that they are now back on track, even with confidence that sales should picking up as the weather improves. This will be attainable, although competition will be tight especially as other major producers, namely INTP and SMCB, may continue to vie for higher sales volume through prices. Our sales growth assumption for SMGR in 2011 is +3.5% versus internally 6%.

Cost should be less of a pressure thanks to recent coal conversion. But thanks to company’s recent coal conversion that now is using 100% medium cv coal. SMGR seems to have the least COGS/ton increase at end of Mar11, compared with INTP of 7.3% and SMCB of 17.5%. The company added that the increase of COGS/ton to date was mainly contributed by the increase in packaging and transportation for raw material costs, that both rose by an average 20-30%

Upside potential seen, but maintain Neutral call. We see more potential bottom-line upside in the company in the remaining quarters, given better efficiency of its cost. We maintain our EPS11F of Rp670 for SMGR. Nonetheless, our valuation is unchanged at Rp9,100/share, thus we maintain our Neutral stance on the stock. SMGR currently trades at PE11F 14.0x and EV/ton US$293.

Jim Rogers: Oil Price Will Keep Rising

Published: Thursday, 5 May 2011 | 2:25 AM ET

Oil prices are likely to continue rising despite their recent spike, because the world's oil reserves are dwindling, famous investor and commodities bull Jim Rogers told CNBC Thursday.
In March, Rogers predicted that crude prices will rise over the next decade. "Where is the oil? I still want to know where is the oil? You know why the price of oil is going up? Because there is no oil," he said.

But if the price is going too high, the race to find the last drops of crude will accentuate, before the search for alternative energy resources yields results, according to Rogers.

"At $300 a barrel they would be drilling for oil under Buckingham palace," he said.

The International Energy Agency "has come to the conclusion that the world's oil reserves decline by six percent a year," and that is an argument for the rising price of crude, Rogers said.

"Say they don't decline by six percent, say they decline by four percent. That means in 25 years there's no oil at any price," he said, adding that rising oil prices will "hurt some people very badly" and some companies will go out of business.

"We will certainly have dips (in oil prices), we will certainly have consolidation, I hope we do. If oil goes into a spike, if it goes parabolic, you have to sell it," Rogers said.

PGAS:Lower volume guidance - Mandiri

As expected PGAS 1Q11 volume fell below 800 MMSCFD on supply reduction from Conoco Phillips. PGAS also lowered its volume guidance to 780-820 MMSCFD from a flat growth of FY10 distribution volume of 840 MMSCFD. PGAS seems to have low confidence it can bring back the lost volume despite the arrival of the Jambi Merang field which is intended to replace the lost volume through gas swap with Conoco. Future news flows are from announcement of upstream acquisition end 2Q11, and the arrival of gas from FSRT (Floating Storage Regasification Terminal). However financial impact of FSRU (FSR Unit) in our view is small. We are maintaining our Buy call with Rp4,960 target price. An addition of Rp50/share from the previous TP is DCF contribution of the FSRU in North Jakarta.

FSRU DCF contribution of Rp50/share. FSRU capex is estimated at US$100mn for piping infrastructure. The FSRU will be rented from Golar at US$500mn for 11 years in conjunction with the length of Mahakam PSC HOA Agreement of 11.75 MT LNG supply. The IRR of the project is estimated at 14% (in USD) for 160 MMSCFD from 500 MMSCFD capacities. Under the assumption of 30% capacity, we estimated a DCF of Rp50/share for PGAS at WACC of 10.1%, no debt, and long term growth rate of 5%.

The trouble with Conoco Phillips. Out of agreed 420 MMSCFD flow from Conoco Phillips, it is likely that PGAS can only obtain 290 MMSCFD. As Chevron needs the gas from Conoco to enhance oil recovery, and since Indonesia is falling behind its production target, it is unlikely BPMigas, which authorizes gas allocation and is also responsible for Indonesia’s oil production, will allow Conoco to reflow its gas to PGAS.

Why then it is still a ‘Buy’. There is a value in PGAS pipe network and its network is the only one reaching up to customers’ (meaning industries, not PLN) door. What happens is lack of supply, therefore, what is needed to make PGAS attractive for gas producers to sell to. Here lies the problem; Pertamina has its own subsidiary Pertamina Gas, which is in the same line of business with PGAS. Pertamina Gas’s license for gas transportation was given in January 14, 2009. Pertamina Gas manages Pertamina’s 43 gas transmission section. Pertamina is state-owned oil and gas exploration and producer. The areas not served by Pertamina Gas are commercial and retail, where PGAS should be focusing on.


- The Indo Govt just released the 1Q11 GDP numbers.
- They came in largely in line with expectations, maybe a tad below consensus.
- 6.5%YoY and 1.5%QoQ (vs consensus 6.58%YoY and 1.67%QoQ respectively).
- According to the CLSA inhouse economist anything above 6% is a good one.

ICBP:Steady as it goes

ICBP posted 1Q11 net income of Rp434bn (+17.8%yoy, +6.4%qoq), which was in line with our and consensus estimates. The YoY slight contraction in instant noodle industry volume might indicate that consumer purchasing power was lagging behind industry-wide ASP increase in 1Q11. This risk is still lingering in conjuction with our economist’s view of no more deflation this year. However, ICBP may be able to maintain its profitability in the next quarters due to margin improvement as ASP increase in mid 1Q11 should fully come into effect. We maintain our Neutral stance on ICBP, which is trading at PER11-12F of 16.3x-14.8x, some 10% premium to its parent company.

1Q11 results were inline with our and consensus FY11 estimate. ICBP booked 1Q11 revenue of Rp4.7tn (+8.6%yoy, +7.1%qoq), translating into net profit of Rp434bn (+17.8%yoy, +6.4%qoq); the figures represented some 23-24% of our and consensus FY11 estimates. While noodle segment’s EBIT still grew by 12.4%yoy, dairy segment’s EBIT contracted by 21.8%yoy due to rising input costs.

Risk of industry contraction. During 1Q11, instant noodle industry volume contracted by around 0.7%yoy. In conjuction with our previous report, we think this could be due to industry-wide ASP increase in January 2011 that restrained consumer purchasing power. This situation, combined with our economist's view of no more deflation this year, reiterates our view to wait and see whether industry size may further contract amidst imminent inflation and noodle ASP increase.

However, margin improvement may help... Even though risk of industry contraction is still lingering, we think the company’s performance in the next quarters could be stable due to margin improvement as ASP increases in both noodle and dairy products during mid 1Q11 will fully come into effect. For noodle, the company increased ASP by some 7-8% in mid January 2011 with around 1 month time lag so that effective ASP increase during 1Q11 was only 2.0% qoq. The same case applied to dairy products with some 3% ASP increase in February 2011.

Maintain Neutral stance. Our DCF valuation with 13.3% WACC and 5.0% TG rate results in ICBP’s fair value of Rp5,200/share. We maintain our Neutral stance on the stock, which trades at PER11-12F of 16.3-14.8x, about 10% premium to its parent company. Main risks are input cost increases, and related-party transaction risks.

anking: Limited surprises in 1Q11 results - Mandiri

Most of banks under our coverage reported in line PPOP, except for BDMN and PNBN. We also noticed trend of declining NIM despite low interest rate environment, which will likely continue in the forthcoming quarters as liquidity might continue to tighten. We thus maintain our neutral stance on the sector with BBNI as the only banks left in our buy list.

Narrowing NIM. As expected, BI’s recent measure to increase Reserve Requirement (RR) from 5% to 8% has tightened liquidity in the sector. For some banks with high LDR ratio, offering higher TD rates would be inevitable which will lead to a higher cost of funds. Meanwhile, higher placement in RR also led to a lower Earning Assets (EA) proportion to total assets thus lower yield on EA. Coupled with lower loan yield as a result of tighter competition in the sector, NIM ended lower in 1Q11 compared with the previous quarter. The highest NIM contraction experienced by PNBN of 60 bps followed by BDMN of 50 bps.

In line PPOP. Large banks' PPOP mostly came in line with our expectation. Banks that failed to meet our expectations were PNBN and BDMN, which might indicate the pressures they face amid tightening liquidity environment. With such results, we maintained our forecast for all large banks, with a downgrade in PNBN and BDMN’s earning forecast is very likely.

No significant impact from PSAK 50/55 implementation. We have yet seen significant impact on the PSAK 50/55 implementation to the bottom line, except for BBRI which has been lagged in implementing effective interest rate on its micro loans. There hasn’t much change either in terms of impairment/provisioning allocation, except for BBCA which has already recognized provision for unused loan facilities since last year. Other banks will likely follow in the next quarter. However, some banks argued that their unused loan facilities are basically uncommitted credit line, hence no need to provide such provisioning in advance.

Except for BBNI, other banks’ valuations are already rich. Except for BBNI, other banks have already reached or been close to our TPs. Consequently, we only have BBNI in our buy list. Unless we are rolling into 2012 valuation, we believe the valuation for other banks have been priced in at the current prices, with possible downgrade for PNBN and BDMN.

Meeting with toll operator Citra Marga (CMNP IJ) from Sarina Lesmina - CLSA

1Q11 net profit grew 18% YoY to Rp77bn, with revenue rose 8% on the back of higher traffic volume from its toll roads. Please see file for details.

Traffic in Waru-Juanda has grown to 25,000 daily from 19,000 before.
CMNP is considering bond issuance this year of ~Rp2tn to finance their stake in Depok Antasari and for other non-toll investments in the infra space. CMNP refuses to provide more details on this investment.
Post restructuring in 2009, balance sheet is healthier, with net gearing fell to 23% from 70%.
Profit in 2010 quadrupled from 2009, hence dividend is expected about Rp60/sh (assuming payout ratio of 40%). This means a 5% dividend yield. AGM will be in mid-June to decide this.
CMNP now trades at 7.1x PE11 (four brokers coverage). The stock has underperformed its better peer, Jasa Marga, which now trades at 14.8x PE11.

More tax cuts coming? Consumer companies with high ROIC - CLSA

In any bull market, a correction is inevitable especially when we reach a point where everyone is on the same side of the trade. We are in the middle of a “inflation” bull market. In recent months this “inflation trade” has become consensus where almost everyone hated the dollar and going long commodities, EM currencies/bonds etc. Technical correction is obviously due especially when the bubble machine, called the dollar printing press, is due to take a summer break by the end of June. (Suddenly all the noise from the deflationist begins to find an audience triggering a little panic). However be assured that QE 2.5, 3.0 whatever it’s called will come for the rescue.

For the last 40 years, federal spending in the US has averaged 21% of GDP while revenue averaged 18%, a structural shortfall of 3% of GDP. Amount of tax and tax rate would have to be doubled, tripled just to match spending. Perfect recipe for Inflation? You bet.

On the other side of the world here in Indonesia, our fiscal position is very different. Instead of raising tax rates, we have lowered tax rates in the last few years (Tax revenue actually more than doubled since the tax cut in 2009 – good example of the Laffer curve at work). Government debt to GDP as of end of 2010 stood at 25%, one of the lowest.

The government (the ministry of manpower) is proposing to double the tax-exempt salary limit from Rp1.3mn (US$US$152) to Rp2.6mn (US$304). Using 5% tax rate for the lowest tax bracket, this translates into Rp790k (US$92) p.a. more cash at the hand of the consumers, or Rp66k (US$7.69) per month. It may sound small but this is meaningful as a percentage of disposable income for many Indonesians.

It is also interesting to see that the government has raised the non taxable limit for the property tax by 100% from Rp12mn (US$1,400) to Rp24mn (US$2,800), as of 1 Jan 2012. This means lower property tax for property owners.

This is very positive for the mid to mid-low income level consumers as the tax exempt directly contributes to an increase in disposable income.

Reading Berkshire Hathaway latest annual note just published, Warren Buffer shared some of his wisdom on what and how to invest in an inflationary environment. The most superior group he picked are high ROIC low capital businesses.

“If you have a product which uses low capital to grow, that is wonderful asset to have in inflation. As inflation goes along your services will command more and more, with no more investment in yourself” Warren Buffet

Consumer companies stated below are all top 3 players in their respective sectors here and there ROICs and ROEs.

Indonesia Banks Big Picture - April 2011: Foreign Investors Remain Overweight, Prefer Low PB - Citigroup

 Foreign investors prefer BMRI, BBNI and BBTN over BBRI accounting change — In the post strong CY10 result month (March), net foreign buying was concentrated in BMRI, BBNI and BBTN (Fig. 1). Banking sector 2010 EPS growth of 43% was well above 27% forecast. BMRI, BBNI and BBTN were 5-10% above expectations. While BBRI surprised the most with 56% EPS growth, with the stock up +12% in April, the data show no significant changes in foreign ownership. There was marginal buying in BBCA and selling in BDMN.
 Valuations back to above mean — Bank shares have exhibited a V-shaped recovery since their 2010 peak, as inflation fears have receded. BBCA is the most expensive stock (almost +2 std above its mean) while BDMN has fallen to mean multiples. BDMN was the only stock to deliver below-forecast 2010 EPS and currently has the highest consensus 2011 EPS growth forecast (23.5%), but with a recent trend of earning cuts.
 Consensus EPS forecast 4% higher in April 2011 vs Nov 2010 — The consensus 2011F forecast has been raised by 4%, since Nov. 2010, mostly for BBRI’s surprise result in March 2011. However, due to higher base (2010 earnings), EPS growth is now only 10.6% (market 2011F EPS growth is 19.1%).
 Foreign investors remain overweight in Indonesia banks (Fig 7) — Comparing MSCI Components with KSEI foreign ownership data, banks are overweight with an allocation of 35%, 240bps above the MSCI weight. BBCA, BBRI and BMRI are overweight stocks while BBNI remains the only underweight. Other overweight sectors include Energy, Auto and Telecom. Food, Beverages & Tobacco is the biggest underweight sector.
 BMRI is our Top Buy and BBCA our Top Sell — We have Buy ratings on BMRI and BBRI based on 1) valuations and 2) 12M growth expectations.

Buy INDY on market confusion - JP Morgan

* Sales Call – accumulate Indika Energy (INDY): The company is holding an EGM on 8 June to approve its non pre-emptive (PE) rights issue plan.

My take: the news came as a surprise to the market, potentially creating some confusion. Use of proceed is unclear at this stage. I am inclined to view any share price weakness on INDY as buying opportunity, for these reasons:

(1) Non PE rights issue tends to have positive share price impact. By Bapepam-LK regulation, non PE rights issue is capped at 10% of outstanding shares; action and pricing must be approved in an EGM. In the case of Bumi Resources, its EGM on 24 June 2010 approved non PE rights issue at Rp2,366 versus closing price at the time of Rp1,890 (25% premium). The other non PE case precedent is Media Citra Nusantara (MNCN) and Global Mediacom (BMTR) when Singapore’s Mediacorp took a strategic stake, also at a premium to market price.

(2) INDY is a solid candidate for inclusion into MSCI Indonesia. Sue Lee, JPMorgan’s equity derivative and index analyst, pointed out that MSCI will announce the result of its semi annual index review on 16 May, to be made effective on 31 May. For MSCI Indonesia, she noted two potential index inclusion: INDY and DSSA. Personally, I think INDY’s chance is looking decent, in-light of potential free float reduction on coal peer Bumi Resources.

(3) Good track record on acquisition. At this stage, investors will need to have faith on INDY management using the non PE rights issue proceed wisely. The last two acquisitions by INDY were good ones, namely Petrosea and Mitra Bahtera Segara Sejati. The company has proven to be conservative when it turned away from Berau Coal acquisition, although the competitive bidder ended up making money from the deal despite the aggresssive pricing at the time.

INDY is the most attractively coal stock (beside Bumi Resources) in Indonesia with a consensus P/E estimate of 10.9x and 8.9x for FY11-12. Arguably, the stock could have been artificially depressed due to corporate actions.

Bakrie and Brothers: SOTP valuation is Rp142/share (BNBR, Rp75, Not rated) - Mandiri

• Yesterday, BNBR market price rose by 11.9%. After a closer look at its SOTP valuation, we understand that BNBR share price has been laggard from its subsidiaries.
• SOTP valuation using yesterday market prices results in BNBR fair price price of Rp142/share. This figure is 9.2% higher than previous SOTP valuation of Rp130/share using 30 March 2011 market price. Between 30 March and yesterday, market price for its SOTP components increased: UNSP by 12.5%, BTEL by 8.6%, Vallar by 4.2%, ENRG by 27.7%, and ELTY by 1.4%.
• We do not cover BNBR stock.

Indika Energy: Seeking approval of 10% non preemptive right issue (INDY, Rp4025, Buy, TP: Rp5,200) - Mandiri

 INDY yesterday submitted notice to Bapepam to have Annnual General Shareholders Meeting and Extraordinary General Shareholders Meeting on 8 June 2011. The highlight agenda were seeking approval of 10% non preemptive right issue
 Based on the company, they are just seeking funding flexibility by having the approval in advance to support any corporate action that will be taken this year.
 As addition, INDY will have additional net debt of around US$315mn this year, combining US$180mn loan for MBSS’s 51% stakes acquisition and net proceed of US$135mn from the bond refinancing (after considering US$165mn exchange offer of the 8.5% Senior Notes that due in 2012). INDY will likely to have around 1.5% lower effective interest rate on its new bond
 Taking into account all those net additional debt, we expect INDY’s debt to equity ratio will increase to around 1.1x from 0.8x in 2010 and net debt to equity ratio will increase to 0.35x from 0.11x in 2010.
 INDY is having many corporate actions this year, including MBSS acquisition, refloating of minimal 20% PTRO’s shares, bond refinancing and 10% non preemptive right issue. The most likely next corporate action should be coal asset acquisition plan in our opinion.
 Currently we have Buy rating on the stock. INDY is traded at 12.2xPER11F

China Top Fund Manager Favors Resource Stocks as Oil Prices Fuel Inflation - Bloomberg

China’s top-performing fund manager is favoring resource and agriculture stocks as the country’s government intensifies its fight against the worst inflation in three years amid rising commodity prices.

Oil prices may extend this year’s surge amid concerns over supply disruptions in the Middle East, while demand for fuels will increase after Japan’s worst earthquake on record spurred countries to shelve plans to develop nuclear energy, Wang Cheng, co-manager of the China Southern Long Yuan Equity Investment Fund (SOINLON), said in a May 3 interview from Shenzhen.

The $1.2 billion fund, which Wang runs with Jiang Pengchen, rose 10 percent in the first quarter of this year, making it the best performer among 735 tracked by Howbuy, a Shanghai-based fund research company. PetroChina Co., China’s biggest energy company, and Heilongjiang Agriculture Co., a producer of rice, soybeans, wheat and corn, accounted for 15 percent of the fund at the end of March, data compiled by Bloomberg show.

“We can find some investment opportunity in areas like resources and agriculture,” Wang, who has been managing money for China Southern Fund Management Co. since 2002, said. “Global tensions recently have added fluctuations to commodity prices and brought negative impact to our inflation. The government will still focus on fighting inflation as labor costs will continue to rise and liquidity remains ample.” She declined to specify changes to her holdings.
Inflation Target

The benchmark Shanghai Composite Index gained 2.1 percent this year on speculation four interest-rate increases since October will tame inflation without slowing the economy. Consumer prices rose 5.4 percent in March from a year earlier, statistics bureau data on April 15 showed, exceeding the government’s full-year inflation target of 4 percent. The economy expanded 9.7 percent in the first three months, topping economist projections for growth of 9.4 percent.

The Long Yuan fund has beaten 95 percent of its peers in the past year, according to data compiled by Bloomberg. Stocks accounted for 74 percent of its portfolio as of the end of March, while bonds took up 4 percent and cash the remainder, according to the fund’s quarterly report.

Wang’s stock allocations are “low,” reflecting the fund’s conservative approach, said Zhang Haidong, an analyst at Z-Ben Advisors, a Shanghai-based funds advisor. The average stock allocation for 375 funds in the first quarter was 81.6 percent, down 1.7 percentage points from the previous quarter, Howbuy said in a report last month.

“Wang is among the most experienced players in the market,” said Zhang. “Her bet on more anti-inflation measures is fair and safe at the moment.”
Most Senior

Wang was described by China’s Securities Journal on March 7 as the most senior among 128 female managers in the Chinese fund management industry. Women account for 15 percent of the nation’s fund managers, the newspaper said, citing statistics from TX Investment Consulting.

PetroChina, whose shares gained 6.1 percent last quarter, was the Long Yuan’s biggest holding as of the end of March, according to its quarterly report. The company wasn’t among the fund’s top 10 holdings in 2010, the fund’s annual report said.

Crude futures in New York have jumped 22 percent this year amid unrest in the Middle East and North Africa and as Japan’s earthquake on March 11 compelled China and India to review plans for atomic energy. Power-station coal prices at Qinhuangdao port, a Chinese benchmark, rose to the highest level since October 2008, the China Coal Transport and Distribution Association said on May 3.
Shenhua Energy

“Some countries have suspended or delayed plans to build nuclear plants after Japan’s accident,” Wang said. “It will raise demand” for oil and coal.

China Petroleum & Chemical Corp. (600028), the country’s biggest refiner and second-largest oil producer, accounted for 4.96 percent of the fund as of March 31. China Shenhua Energy Co., a unit of the nation’s biggest coal producer, represented 4.75 percent. Shenhua surged 18 percent in the first quarter, while China Petroleum and Chemical advanced 5.8 percent.

“At the moment, the priority for the macro controls is fighting against inflation,” Wang said. “Further tightening measures will be carried out depending on inflation numbers.”

Food costs, which research company IHS Global Insight says account for about a third of China’s consumer prices basket, rose 11.7 percent in March from a year earlier, the National Bureau of Statistics said at a briefing on April 15. The United Nations FAO Food Price index jumped 25 percent last year, the second-steepest increase since at least 1991, and surged to a record in February.
Trading Rebound

Shares of Heilongjiang Agriculture, Wang’s fifth-biggest holding as of March 31, gained 8.3 percent in the first quarter.

Citic Securities Co., the nation’s biggest brokerage, accounted for 8.07 percent of the Long Yuan fund at the end of March, making it the second-biggest holding. The company’s shares climbed 11 percent in the first quarter on speculation earnings would benefit from a rebound in share trading as China’s stocks rose the most among Asia’s biggest equity markets in the first quarter.

For the second quarter, Wang is favoring manufacturers with “core technologies” as they are critical to the government’s economic plans over the next five years to move away from exports into fledgling industries such as technology and high- end machinery manufacturing.

The nation’s manufacturing sustained its expansion in April, a purchasing managers’ index showed May 1. The index was 52.9 in April, compared with 53.4 in March, China’s logistics federation and the statistics bureau said. A reading above 50 indicates expansion.

“China’s economic growth has shown signs of stabilizing,” Wang said.

--Irene Shen. With assistance from Zhang Shidong. Editors: Darren Boey, Allen Wan

To contact Bloomberg News staff for this story: Irene Shen in Shanghai

India to take up to 2 mln T Russian coal in 2011 - Reuters

India's surging demand for thermal coal will draw in 1-2 million tonnes of Russian supply for the first time in 2011 to compete with South African and Indonesian coal,
Indian importers and Russian exporters said.
Although Russian coal is likely to remain a minor part of India's projected 140 million tonnes of imports for 2011/2012, India has become a key growth market and has started to import Russian material for the first time this year, Russian exporters said.

So far this year India's biggest trader importer, Adani Group, has bought two capesize cargoes of Russian coal, a few smaller traders have booked several panamax cargoes and others are in talks for 2011 supply with Russian sellers.
"Around 1-1.2 million tonnes of Russian coal could go to India this year," one major Russian exporter said.

Other Asian buyers such as South Korea and Taiwan will currently pay higher prices than India, he said and China is also likely to pay more when buying resumes.
Indian traders importing a variety of coal origins estimated that up to 2 million tonnes of Russian coal could be imported this year.
"About 2 million tonnes is a reasonable figure because that equates to only one capesize cargo every couple of months, but it all depends on how competitive Russian prices are with South African and Indonesian coal," said a source at Coal & Oil, one of India's biggest trade importers.

Most of India's thermal coal imports since 2005 have come from Indonesia with a smaller proportion from South Africa but this year the rising cost of Somali pirate attacks on bulk vessels and low Pacific freight rates has prompted Indian importers to diversify their sourcing.
Russian coal coming from Pacific ports avoids the pirate hot spots in the Indian Ocean.

Traders taking trial cargoes of Russian coal into India said they are looking at placing this into state utility tenders where a broad range of coal qualities are acceptable rather than to cement or sponge iron makers who have tighter specifications.

"We are not the only ones looking at coal origins which don't carry the risk and cost of piracy," a trader at Indian importer Comtrade said.
"From Australia, the cost of the voyage and the insurance to east coast India from Newcastle has just now become competitive with South Africa - it's actually $2-3 cheaper on a delivered basis than from Richards Bay."

"Our first Australian panamax coal vessel loaded in the first week of April but capesize cargoes would be even cheaper - we spotted the opportunity and took it," said an official at Indian trader Knowledge Infrastructure.
Several Indian importers said they had either already bought or were in negotiations to buy, Russian coal.
India's biggest trader importer, Adani, in March bought its first shipment of Russian coal.

India's roaring economy is sucking in huge amounts of coal and Indian buyers are turning to the widest number of suppliers for the cheapest possible fuel.
"There's huge demand for the lower-grade coal from India - whatever we could produce, India would buy, but lack of rail capacity is restricting the ability to export," one South African exporter said.
Russian suppliers have been seeking a new outlet for lower-grade coal since China halted buying last November.
"For Russian coal we are engaged in serious discussions with one of the biggest exporters now because the lower-grade Russian very attractive to India which has huge demand for this coal," the Knowledge official said."
"We are looking at Russian coal seriously and the voyage from Russia's Pacific ports of Vanino and Vostochniiy to east or south India is a relatively short, so cheaper route," the Comtrade official said.

Another Indian trade importer, who asked to remain anonymous, and buys large tonnages from South Africa and Indonesia, has already brought in Russian coal to India and is in talks to take up to 1 million tonnes in 2012.
Some of India's biggest trade importers said they have already cut back on South African imports because Indonesian coal is up to $10 a tonne cheaper on a delivered basis.

If Russian coal is to become a regular source of supply into India it must be priced competitively against Indonesian material, they said.
"The lower energy content Russian coal has to be priced competitively against Indonesian for the Indian market, because that's what it's closest to in quality," said another Indian trader who has signed a term deal for Russian supply.
"Nobody in India is going to pay a premium for Russian coal, India is an extremely price-sensitive market," he said.

Global factors not supportive of base metals rebound - Commodity Online

MUMBAI (Commodity Online): Economic uncertainty, recovery in the US dollar and rising inflationary pressure has painted the base metals’ market red. Copper prices at LME had managed to climb above $9600 per tonne last week supported by the weakness in the dollar; however, falling risk appetite killed the momentum.

In the broader sense, Industrial metals have been on the back foot after it climbed towards fresh peaks during mid first quarter of 2010. Employment and housing market of US is yet to stabilise and European debt troubles are still at large. In the East, inflation appears to be the bigger threat. The fundamental backdrop of industrial metals is grim and any possibility for pullbacks to erstwhile peaks is slimming.

Chinese inflation treaded at 5.4 percent, above the government target, in spite of the incessant effort of the country’s central bank (PBOC) to rein prices in. China has already raised reserve requirements for commercial banks four times this year and benchmark interest rates 4 times since last October.

The weaker than expected Chinese manufacturing PMI set the market tone weak on Tuesday in spite of the comment from the PBOC official that Chinese inflation will moderate in the coming days. Chinese manufacturing PMI fell towards 52.9 from the previous 53.4.

Nevertheless, the metals found solace in the decent factory orders and vehicle sales of US. But, MCX witnessed its industrial metals end the day with gains as the depreciation in the Indian rupee offset the weakness that gripped international prices.

At the time of writing, most active MCX copper May futures traded at 416.95 per Kg, up -1.48%. Lead, Zinc and Nickel closed at -0.53%, -1.40% and -0.59% respectively on Wednesday.

The market currently has adopted a wait and watch strategy ahead of the European Central Bank rate decision and US Non-Farm payrolls that will unfold later during the week.

The stock movements, on the other hand, of base metals last week were mixed. Copper inventories fell almost 10 percent for the sixth continuous week towards the lowest since December 2011. Aluminium stocks also fell during the period, but zinc and lead stocks climbed.

Rabu, 04 Mei 2011

Indika Energy sets non-preemptive rights - Insider Stories

An integrated energy company PT Indika Energy Tbk (INDY) has unveiled a proposed non-preemptive rights of a maximum 10% of its enlarged capital The non-preemptive rights has been listed at the agenda of extraordinary of shareholders' meeting scheduled on June 8 2011.

Indika's outstanding shares are 5.21 billion shares or Rp21.24 trillion market capitalization. The non-preemptive rights is usually intended to seek a cash from the shares sale to certain strategic investors.
Indika, the parent company of coal mining company PT Petrosea Tbk (PTRO), has also appointed Macquarie Securities and Citi as joint bookrunner to sell at least 18% of Petrosea shares during second offering.

Petrosea re-floating shares into the market after the stock split is intended to unlock the hidden value of Petrosea, especially on PT Santan Batubara.
An executive familiar with this information revealed that the re-float of Petrosea shares will take place after it completes a stock split in a near time.

AKR names Karunia as coal contractor - Insider Stories

PT AKR Corporindo Tbk has appointed PT Karunia Bumi Khatulistiwa as the contractor of coal mining concession in North Barito, South Kalimantan. The mine is expected to produce 300,000 tons this year.

AKR’s President Director Haryanto Adikoesoemo stated his optimism that, due to world’s high demand, mining and coal logistics business have a bright prospect.
“The expansion is part of our business target in energy and logistic infrastructure development sector,” he said in a press release yesterday as quoted by Bisnis Indonesia daily today.

The company acquired the concession at end of 2009 through its subsidiary PT Bumi Karunia Pertiwi. AKR is currently working on constructing coal terminal facility in Buntok Baru, Center Kalimantan that could accommodate 1,000 metric tons/hour barge loading conveyor.
“It is expected to run in the next 2-3 weeks. All investment requirements will be handed over to contractor.”

Corporate Result Flash Medco Energy - Bahana

1Q11 performance
§ MEDC’s 1Q11 net profit reached USD10m (+11% y-y), around 1% above our estimate (26.3%) but 5% lower than consensus’ projection (exhibit 5). We expect 1Q11 earnings to form 25% of full-year forecast.
§ 1Q11 sales were up 37% y-y to USD255m but with COGS jumped 46% y-y (on higher production and lifting costs), gross profit was up just 22% y-y. Oil and gas revenues, which contributed 65% to revenues grew 33% y-y on higher oil prices, while sales of chemicals and other petroleum production increased 90% y-y contributing some 14% to revenues.
§ With operating costs up 32% y-y, operating profit growth slowed to +16% y-y, accounting for some 2% above our estimate, but in line with consensus estimate.

In 2011, we expect the company to book USD48m in net income, which is down 42% y-y on lack of stake sale. For 2012, MEDC expects some stake sale and this will provide additional boost for earnings next year. However, we expect some earnings revisions as we are planning to upgrade our current oil price assumption from USD95/barrel to USD100/barrel.

Recommendation and valuation
We continue to maintain our BUY recommendation and IDR4,300 DCF-based target price on MEDC. Currently, the stock is trading on 7.6x EV/1P reserve or 6.5x EV/2P reserves.

SGRO:Margin expansion - Mandiri

SGRO booked strong 1Q11 net income, beating our and consensus estimates. The main drivers were higher- than-expected CPO production volume and higher gross margin. Going forward, based on SGRO’s planting profile on nucleus and plasma (exhibit 3), we expect FFB contribution from nucleus to total processed FFB to exceed FFB contribution from plasma from 2013 (exhibit 5). Assuming CPO price stays the same, increasing FFB contribution from nucleus should keep margin expanding (exhibit 4). We maintain BUY recommendation on SGRO with a DCF-derived TP of Rp4,150/share, which implies PER FY11F and FY12F of 13.8x and 12.2x, respectively. We maintain SGRO as our top pick in the plantation sector as we expect its margin expansion to continue.

1Q11 results exceeded our and consensus estimates. 1Q11 net income beat our (39.6% of our FY11F) and consensus (36.8% of consensus FY11F) estimates. The main reasons were higher- than- expected production volume and higher- than expected gross margin.

CPO inventory of 35,000 tons would be an extra revenue booster. Although the 1Q11 net income has exceeded our and consensus, SGRO still has extra ammunition to boost its revenue in the next quarters, e.g. CPO inventory of 35,000 tons. Such size is quite a huge inventory, considering 1Q11 CPO sales volume of 72,131 tons.

As we have expected, higher nucleus leads to margin expansion. As we have forecasted in May 2010 (Our report “Improvement in cost structure ahead” on 12 May 2010), SGRO’s gross margin should improve because of higher FFB contribution from nucleus to total processed FFB. Using AALI as a benchmark, SGRO’s 1Q11 gross margin of 43.7% beats AALI’s 1Q11 gross margin of 38.9%.

Expect nucleus contribution higher than plasma contribution from 2013. Going forward, based on SGRO’s planting profile on nucleus and plasma (exhibit 3), we expect nucleus contribution to total processed FFB to keep improving and surpass plasma contribution from 2013 onward. We expect higher contribution of nucleus because the growth of FFB from nucleus is higher than the growth of FFB from plasma. Assuming CPO price stays the same, higher contribution from nucleus should keep gross margin expanding in the future.

HRUM All the right pieces - CIMB

(HRUM IJ / HRUM.JK, OUTPERFORM, Rp9,450 - Tgt. Rp12,000, Coal Mining)

We initiate coverage of Harum, an efficient small-medium coal-mine operator, with an Outperform rating and price target of Rp12,000 (16x forward P/E). We foresee attractive earnings growth (3-year CAGR forecast of 36%) from price and volume growth, with strong dividend upside (5.8% for 2012 yield) as the completion of major capex would mean stronger cash flow generation in the coming years. Harum scores well on profitability (ROE of 75% in 2011), even though its operational profile is about the same as the average Indonesian coal miner. Our target price is set at a 19% premium to the peer average, to reflect its superior growth prospects, ROEs and higher dividend potential. Production and earnings delivery should serve as re-rating catalysts.

JASA MARGA (JSMR): Above consensus Strong Defensive +28% Y/Y 1Q11 EPS! - Credit Suisse

At Rp3,350- JSMR is trading on Consensus 15.4x 2011 PER (in line with CS Indonesia Universe 14.6x 2011F PER) and implied 25% Upside to Consensus Target Price Rp4,183. I am recommending Buy JSMR as Inflation hedge benefiting from Strong IDR, growing domestic consumption on car and improving Sovereign rating to Investment Grade (Risk-free rate), with further upside if Parliament approving the new Land Reform Bill.

· Ella Nusantoro: Jasa Marga reported 1Q11 Net Profit of Rp371bn (+28% Y/Y and 26% of 2011 Consensus) on the back of Revenue Rp1,155bn (+14% Y/Y and 24% of 2011 Consensus). Jasa Marga remains a defensive toll road operator with guaranteed tariff increase in-line with Inflation, while Indonesia car penetration amongst the lowest in the world!

KALBE FARMA (KLBF): Below Strong +23% Y/Y 1Q EPS- Beneficiary of Strong IDR - Credit Suisse

Following recent slightly below expectation 1Q11 results (See Page 7) but upgrades due to stronger IDR assumptions (Page 3), Ella’s Earnings estimates are revised as Figure 6 page 3. KLBF continues to offer defensive earnings growth on the back of growing domestic consumption, Good Management and Solid Balance Sheet, with inorganic upside on the table. At Rp3,600- KLBF is trading on Justified Premium 22.0x 2011F PER on +27% EPS Growth (in-line to historical average 50% premium to market, CS Indonesia Universe is on 14.6x 2011F PER) and in-line to DCF Rp3,400, however on valuation we reiterate TAKE PROFIT and switch to Buy GGRM/ICBP!

· Ella Nusantoro (Report attached): We reiterate our NEUTRAL rating on Kalbe Farma (KLBF.JK) and raise our DCF-based target price to Rp3,400 as we revise our assumption on growth to 6%, from the previous 5.8%, based on Indonesia’s 2011E GDP growth. We are using 11.7% WACC and our new target price implies a 20.8x 2011E P/E on 1% earnings growth CAGR for 2011-13E.

· Beneficiary of stronger Rupiah. With majority of its raw materials being imported, Kalbe Farma’s earning is sensitive to the fluctuation of Rupiah/USD. Approximately 90% of its raw materials’ cost is USD denominated, we calculate that for every 1% change in Rupiah, it will impact earnings by around 2%, assuming other things remain equal. We assume average exchange rate at Rp8,620 in 2011 and Rp8,175 in 2012 from the previous Rp8,550.

· What to do with the cash? As at the end of March 2011, Kalbe Farma’s cash stood at Rp2.3 tn, with minimal debt, with its net cash at Rp2.1 tn. The company has been in a net cash position since mid-2004 and continues to pile up cash along with its strong operational cash flow, while capex remains minimal (Rp650bn). The management recently announced that it is going to increase its dividend payout ratio to 50%, from 20% last year, pending the shareholders’ approval, which in turns to provide less than 2% yield. We believe the company still has an upside to distribute higher dividend.

· Has not decided on Treasury shares. Kalbe Farma has 781 mn treasury shares (worth Rp2.8 tn). It has not decided whether to retire them or place them back to the market. Retiring the shares will increase the company’s EPS by around 8%, and should it sell them back to the market, the company will be able to book a gain of Rp2 tn.

Bank Mandiri, the bad and the good - CLSA

Bret “THE POOL” Ginesky looked at Bank Mandiri (BMRI IJ). BMRI’s 1Q11 results came in at Rp3.8tn (+89% YoY) or 31% of our FY11 estimates. However, after adjusting for Garuda, the earnings were Rp2.7tn (+34% YoY) and 22% of our FY11 estimates. Reiterate BUY.

In his report, Bret identifies the bad and the good things going on with BMRI. Overall, the good far outweighs the bad. Re-iterate BUY with TP of Rp9,000.

Key points from the report:

Negative impact from the 3mo T-bill replaces 3mo SBI as the reference rate for Recap bonds. Currently BMRI holds Rp76.3tn in variable rate bonds implying a -Rp687bn impact to net interest income and -4.2% to earnings, assuming 5.2% T-Bill rate for 2Q-4Q 2011. The question is how BMRI’s earnings are impacted if 3month T-bill rate moves lower than 5.2%. The sensitivity table below shows the impact on net profit.

BMRI’s core non interest income was up 29% YoY and core fee ratio increased to 21% of total revenues. Driver is a 38% YoY rise in fees and solid growth in other categories (+61%). Cross selling is the key.
It appears that the parliament is very close to approving a haircut provision for written off loans. Currently, BMRI has approximately Rp33.0tn (US$3.8bn) of written off loans, and with recoveries of 10-20% we anticipate this could be accretive to equity by Rp3.3-Rp6.0tn over a 2-3 year period.
Valuation: At 2.5x 11CL PBV, BMRI has additional upside as rising ROE is driven by PPOP expansion and credit quality improvements. We reiterate our TP of Rp9,000, representing 3.1x and 17x PBV and PE as we anticipate another re-rating is in the cards.

ENRG:Delivering the promise - Mandiri

Energi Mega Persada (ENRG) has finally recorded net income in 1Q11 at Rp14bn, still below our and consensus estimate due to cyclicality. We see that ENRG will push production in later period. Since our first recommendation, ENRG price has increased by more than 60%. We believe ENRG prices will still go up given that ENRG provides compelling metrics for each type of investors. On asset-based, ENRG is still below its local peer at EV/2P US$1.8/boe. Multiple wise, PER12F is 6.7x, still much cheaper than regional and local peers (13.2x). As ENRG has fulfilled production in Bentu and PUO as promised, as well as high conviction in Kangean TSB, we lower our uncertainty discount from 25% to 10% to arrive at new TP of Rp220/share. We then reiterate our Buy call.

1Q11 result below estimate on cyclicality. ENRG reported strong revenue of Rp422bn (+64.0% yoy, 0.6% qoq), below our and consensus estimates due to cyclicality and minor delay in Bentu and Kangean PUO production (expense has been incurred). Meanwhile, ENRG finally booked net income of Rp14bn although still below ours and consensus. We still believe that ENRG will push production by 3Q11-4Q11 as we can see 4Q10 revenue itself (Rp419bn) reached 50% of total 9M10 revenues (Rp831bn), while 4Q10 operating income (Rp137bn) even overlapped 9M10 level (Rp54bn).

Oil price rose above estimate. Oil prices both globally and locally have experienced sharp increase since the start of the year. Indonesia Crude Price (ICP) as of Mar11 reached US$113/bbl (+43.7% yoy, +16.4% ytd). ENRG booked ASP of US$108/bbl in 1Q11, higher than its estimate of US$85/bbl. The ICP increase will clearly benefit ENRG this year, coupled with production ramp-up in Bentu and PUO.

Push Bentu and PUO in next period. Production in Bentu and Kangean PUO fields was slightly delayed to end Feb11, which resulted in lower income. ENRG plans to push production from those fields in 2Q/3Q to 7,000 boepd (above initial target). Although it may cause minor reservoir damage, we appreciate such plan as it may make up for the previous delay and foster FY11F production target. If this plan is enacted, we may see work-over costs to increase next year.

Upgrade TP to Rp220/share, reiterate Buy. ENRG’s has so far fulfilled its production schedule with the initiation of Kangean PUO and Bentu, despite minor technical delay. Moreover, the signing of GSA in Kangean TSB field previously has also indicated that the probability of the success in Kangean TSB is very high. We appreciate the current achievement and therefore lowered our previous 25% uncertainty discount on our TP to 10%. This leads to a higher TP of Rp220/share.

Banking Sector Update: 1Q11 Results Round-ups - Some slowdown - Bahana

Still stellar earnings growth, but slowing
Indonesian banks under our coverage reported 1Q11 results, which were slightly above market consensus, but inline with our expectations. Exhibit 2 shows the various banks’ performance sorted by their 1Q11 y-y operating growth from highest to lowest. We note that 1Q11 y-y operating profit growth for the sector slowed to 33.1% from 58.2% in 4Q10. On the bottom line, net earnings growth also decelerated to 39.9% y-y in 1Q11 (from 81.7% y-y in 4Q10) in spite of BMRI’s performance (+88.7% y-y), supported by massive recoveries (including from Garuda worth IDR1.45t), and BBRI (+51.6% y-y) which benefited from the late implementation of PSAK 50 & 55. Stripping these out, the industry would book 1Q11 net earnings growth of around 20% y-y.

Loan growth slowed; Potential further pressure in margins
Loans grew 23.5% y-y (based on eight banks, representing 55% of the total industry’s) and 0.4% q-q due to seasonality. Despite weak q-q loan growth, consumer and micro loans continued trending up. Separately, we have seen pressure in NIM due to higher average funding costs, arising from the 25bp hike in February’s BI rate, particularly for small-mid cap banks, while yields on earnings assets have remained sticky. Margin pressure is likely to persist due to the following rationales:
§ Increased lending competition is inevitable as the market is flushed with liquidity. This reflects the current industry LDR of 73.8% (8 banks under our coverage) and strong inflows in government papers (+24.1% y-y to IDR1,106t). Corporate lending tends to be crowded with alternative and attractive financing via offshore USD borrowings and the capital market through bonds and rights issues. Meanwhile, greater interests in consumer loans are forcing banks to enter the SME/ commercial fray.

§ New benchmark of the government’s variable rate bonds, which is tied to the lower 3-month T-bills, has become unfavorable for banks with high exposure to the bonds, lowering the average yield on their earnings assets. Within our banking universe, BMRI has the biggest impact with total exposure of nearly IDR90t.

§ As we expect BI rate to increase another 25bps in the middle of this year, higher average funding costs will materialize, particularly for mid-small banks with high LDR. In contrast, banks with strong deposit franchises will be better positioned to benefit from sufficient liquidity.

Most have reached our target prices; Stock picks: BBNI & BJBR
We like banks with competitive funding structure (i.e. BBCA, BBNI, and BMRI), allowing loan portfolio remix, which would in turn help to protect margins and ensure continued earnings growth. However, with most banks approaching our target prices, we only have BUY ratings on two banks: BBNI on 2011 P/BV of 2.0x and BJBR (niche market) on 2.3x.

Strong 1Q11 earnings but any fresh catalyst ahead? - BNP Indo

In today’s note we discussed the reason for the market’s rapid recovery and on how best to position in the market.
* Market recouped earlier losses to post a 3.9% gain YTD due to easing of inflation, a stronger currency and solid 1Q11 further supporting the strong FY2010 results.

* Earnings growth remains strong at 28% y-y in the 1Q11 with out performance delivered by banking, consumer and industrial sectors. This further solidifies the thesis that domestic story will rule in 2011 supported by a strong economy and a strengthening currency.

* Given the recent rally, probably reflecting all the positives such as a strong IDR, peaking inflation, rising FDI and a strong fiscal position, we believe the market will struggle to find new catalysts. Add to that the fact that at 15.4x 2011 earnings valuation no longer looks compelling, we maintain our NEUTRAL view on the market with a target index of 4,100, implying 8% upside.

* We maintain our investment strategy:
* LONG domestic plays such as Astra int’l and Indofood driven by
stronger currency
* LONG infrastructure play as beneficiaries of the potential passing of
the land acquisition bill. Indocement and BNI fits this bill.
* LONG BRI as it will continue to benefit from potentially higher
interest income recognition due to new accounting rule and trades at a
25% discount to BCA despite producing similar levels of ROE.
* SHORT BCA and Unilever as they are over-valued.

TLKM Sustained Competition - CLSA

TLKM’s 1Q11 numbers were soft with 2% revenue and 1% NPAT growth
yoy. This was below consensus expectations for the FY11 of 6% revenue
growth and 9% NPAT growth. We suspect further consensus downgrades
to come. Again the issue lies with a rapidly maturing & hypercompetitive
mobile market. This is no more evident in TLKM’s +74% increase in
marketing costs to maintain 2% revenue growth. With no exposure to a
rising rupiah and no earnings growth catalysts we still prefer to own
other domestic plays such as the Banks which continue to outperform.

1Q11 numbers again soft – consensus to downgrade
TLKM’s 1H11 results were soft with revenue growth of just 2% which is well
below consensus expectations of +6% for FY11 but broadly in-line with our
bottom of street forecasts of +1% revenue growth for the full year. NPAT
growth of +2% for 1Q11 was also uninspiring compared to consensus
expectations of +9% growth for the full year but higher than our -2% decline
for the FY11. We suspect that consensus will be tweaking their numbers
downwards following this result.

The problem remains competition–media companies benefiting
TLKM continues to suffer from the hypercompetitive structure and a rapidly
maturing market. Mobile penetration is close to 70% with tariffs amongst the
lowest in Asia. This is also evident in TLKM cost base with marketing
expenses increasing a massive +74% in 1Q11 yoy. The winners here are
clearly the advertising/television companies and the individual consumer.

Not leveraged to a rising rupiah
The JCI has performed very well of late reaching fresh record highs. The
stocks performing have been domestic consumption plays and rate sensitive’s
with inflation fears surprising on the downside. One of the key themes has
been the strengthening IDR. Telkom is not a beneficiary as both its revenues
and costs are largely IDR based. Also most of its debt is rupiah denominated.

Valuation uncompelling – better domestic proxies and yield plays
While trading broadly in line with regional peers, Telkom offers considerably
lower earnings growth and no yield angle. This is no longer a must-own stock
with its index weighting falling from above 18%to just 5% now. Using a blend
of fair values derived from DCF and forward PE methodologies, we arrive at a
target price of Rp6,456, which implies 16% downside. For investors seeking a
domestic proxy we would advise switching to the Indonesian banks.

Asia ex Strategy - Earnings at New Peak; Not so the Market, nor Multiples - Citigroup

 Based on trailing earnings, we've reached a new peak — Earnings are now above their 2007 peak but neither the equity market nor the P/E ratio are. This against a background of record low interest rates. This indicates that investors continue to apply a much higher discount towards equities than they did a few years ago. The wall of worry is alive and well. Markets enjoy climbing it. Worries regarding the 2011 earnings forecasts for Asia ex are also overdone.
 Year 3 is the lowest earnings growth year historically — Not only that but we have hovered at 13-15% earnings growth for 2011 since late last year. Even if the growth rate comes down to 10%, it is hard to see investors selling equities in light of returns available in other asset classes. Note too that what is occurring with earnings revisions today is very consistent with what we’ve seen in prior cycles. At present they are no better or worse.
 The Philippines are showing the best revisions; India the worst — Amongst various sectors, energy ranks top followed by banks. Both sectors also continue to see fund inflows. Utilities and telecoms are showing the worst revision profile in the region. We continue to be focused on North Asia cyclicals, including energy and
banks. The wall of worry is there to be climbed and that’s what the market will continue to do.

Bank Negara Indonesia (HOLD) - Loan to build up towards 2H11 - Kim Eng

BNI posted Rp1.25t in profit for 1Q11, missing our Rp1.46t forecast by 14.6%, as slow loan growth and a high applied tax rate took a toll on earnings. However, should loan quality continue to improve and the bank reach its loan recovery target of Rp2.2t by YE11, the slow start in loan expansion would be unlikely to derail BNI’s 2011F profit growth. Maintain HOLD.

Corporate Result Flash Bumi Serpong Damai - Bahana

1Q11 performance
§ BSDE reported 1Q11 bottom line which was in line with our and consensus estimates but operating profit was some 4-5% below due to 30% y-y higher operating expenses.
§ 1Q11 pre-tax profit was mostly in line with our and consensus estimates, supported by net interest income, high other incomes and profit from associated companies.
§ Despite lower 1Q11 gross and operating margins, BSDE showed higher 1Q11 net margin of 26.1%, partly helped by the absence of extraordinary loss.

Post the consolidation of its 3 sister companies (DUTI, SMW and SMT), BSDE will book modest 2011 top line growth of only 9% y-y to IDR2.7t (sector 23%) based on our estimate. Most of this growth will come from BSDE while projects from the other 3 companies are already at maturing stages. However, we estimate higher revenue and earnings growth in 2012 (13% revenue and 19% net profit growth) on the back of high 3Q-4Q10-1Q11 marketing sales. Post this consolidation, additional land from these sister companies would provide BSDE the arsenal to develop property products outside Serpong area, supporting sales growth in the coming years.

Recommendation and valuation
Following the release of BSDE’s 1Q11 results, we raise 2011-12 net profit by 3-4% on the back of higher 2011-12 gross margin as a result of the consolidation of recurring incomes from its subsidiaries. Thus, we retain our BUY recommendation on the counter with discount-to-NAV based target price of IDR1,090, reflecting some 18% upside potential from current levels.

BORN (TP Rp2,000) : 1Q11: Sales are below expectation but earnings are in line - Credit Suisse

● BORN posted 1Q11 net income of Rp426 bn, 18.9% of our FY11 estimate, 19.8% of consensus estimate, and in line with our expectation. 1Q11 revenue reached Rp1,202 bn, up 123.8% YoY, 16.1% of our FY11 estimate and 16.2% of consensus estimate.
Sales volume was 532,609 tonne, below our expectation or 16.6% of our FY11 estimate of 3.2 mn tonne.
● Sales volume was below our expectation given delayed shipments as BORN was waiting for BHP pricing for 2Q11. However, earnings were in line, given better ASP and good cost management. We also slightly decrease our cost assumptions by
3.8% and 3.2% and Rp/US$ forecasts to Rp8,620 and Rp8,175 for 2011 and 2012, respectively.
● We expect BORN to still be able to meet our volume target of 3.2 mn tonne as it is ramping up production throughout 2011. We still expect earnings upside to our forecasts from ASP as BORN has been negotiating in the spot market during 2Q11 with benchmark price ranging between US$300/t and US$330/t.
● We maintain OUTPERFORM and target price of Rp2,000.

PTPP IJ is one stock to accumulate in weak market - JP Morgan

1) FY11 earnings set to grow aggressively. PTPP entered the year 2011 with Rp6.0trn worth of carry-over project, more than double the amount (Rp2.6trn) when it entered year 2010. The Rp6.0trn backlog, coupled with Rp3.0trn new contracts obtained during 1Q11, stacks-up well against FY11 revenue target of Rp8.5trn (in other words, the revenue projection is almost in the bag). FY10 actual revenue was Rp4.4trn, so the Rp8.5trn forecast represents a 93% yoy increase. PTPP management targets FY11 net profit of Rp335bn, on the back of Rp8.5trn revenue and 4% net margin, or 66% yoy (implied FY11 P/E of 9.9x).

2) Zero option value on the government fixing land acquisition law. Infrastructure investments have picked-up considerably even before the government addressed the land acquisition hurdles, which set to accelerate when it does. I personally think there is a good chance that the law can be passed within the next 12 months, to ensure president SBY leaves with good legacy (his term will end in 2014, and it may take 2 years for the country to feel the impact of explosive infrastructure investments with revised land acq law). PTPP is the stock to buy when the event occurred, being state construction company with low financial leverage, allowing the company to further double revenue in year 2012 without capital constraint.

Bank Danamon - 1Q11 PPOP in line with our forecasts - Credit Suisse

● BDMN reported 10% YoY, 5% QoQ 1Q11 PPOP growth, 22% of our forecasts, in line with our expectations. 1Q11 earnings up 9% YoY, 12% QoQ, 20% of our forecast and 21% of consensus forecasts, given higher-than-expected 2011E provision expense.
● BDMN reported 29% YoY CASA growth, higher than 25% YoY of total deposit growth. Given BDMN’s relatively lower CASA franchise, we believe that the bank’s earnings is relatively less resilient towards risk of higher competition for funding.
● While we remain comfortable with BDMN’s fundamental outlook, we believe that BDMN’s stock price is fairly valued. BDMN is trading at the fourth highest 2011E P/E and 2011E P/B of all Indonesian banks under our coverage.
● We maintain our NEUTRAL rating on BDMN. We increase our target price for BDMN from Rp6,300 to Rp7,000. Our new target price for BDMN is based on Gordon’s Growth model, assuming 8% risk free rate (from 8.5%) and market premium of 5%, implying 2.8x 11E P/B, 2.5x 12E P/B, 15.1x 11E P/E and 13.1x 12E P/E

PT Perusahaan Gas Negara - Alert: 1Q11: Operating Results Within - Citigroup

PGAS logged a 19% rise in net income in 1Q11 to Rp2.1t (29-30% of consensus and CIRA's 2011E).

The key takeaways
Sales came in weaker than expected with just 6% Y-Y growth to Rp4.7t (23% of CIRA's
2011E). The main culprit was weaker than expected distribution volume of 780 mmscfd
(-7% Y-Y). Management attributed the volume decline to shutdown maintenance of its
gas suppliers and continued shift of ConocoPhillips gas supply to Chevron. PGAS’ gas allocation of c. 90-110 mmscfd remained diverted to Chevron in 1Q11. Hence, our
estimate of a 6% increase in distribution volume in 2011E to 881 mmscfd looks too

Mitigating the volume decline, PGAS' ASP came in better than our expectation at
US$6.9/mmbtu (CIRA: US$6.6/mmbtu). Thus, gross margin came in better than expected at 63.2% vs. 59.7% as we expected. EBIT margin expanded to 47.9% from 47.0% in 1Q10, underpinning the 8% Y-Y growth in EBIT to Rp2.3t (24% of CIRA's 2011E).
Below the operating line, PGAS booked a Rp414b of derivative gain on its JPY cross
currency swap.

Distribution volume outlook remains tepid in 2011E as there is no definite date when PGAS will receive back its allocated gas currently shifted for oil-shifting purposes. The ramp up in Jambi Merang gas production has been below expectation as well. The volume outlook is considerably better for 2012E as management revealed that PGAS has appointed a contractor for its FSRU West Java project and expects the
project to be completed in 2012E, as previously expected. We maintain our Buy rating on the stock as we think the tepid earnings growth for 2011E has been factored in the share price. We expect earnings growth to resume in 2012E post the commissioning of PGAS' FSRU project.